Ofgem criticises energy suppliers' direct debit practices

27 March 2009 / by Rachel Mason

Energy watchdog Ofgem has criticised the UK's energy suppliers for the way they handle their customers' direct debit payments.

The regulator reviewed the direct debit arrangements of the big six gas and electricity providers following complaints by customers that they had seen significant increases in the amounts they were being asked to pay.

Although Ofgem's report shows no evidence of 'over-recovery' or any "systematic errors" in payments, it has criticised the lack of transparency and poor communication by suppliers.

The watchdog claims that many customers have been left struggling to understand why they are being asked to pay more, especially when they may already be significantly in credit on their account.

Ofgem says its review has also highlighted that refund policies are ambiguous; it wants suppliers to do more to make the grounds for refunds clearer and to give consumers more choice on how their credit balances should be used or repaid.

The regulator will also be demanding that energy providers adjust direct debits on a

"timely basis" in order to avoid debt build-ups when prices rise and will be asking providers to urge their customers to provide up-to-date meter readings so that more accurate payment plans can be set.

"Our investigation found no evidence that suppliers are recovering more money from direct debit customers than they are due. However, their explanations of the payment increases and their practices on refund policies are wholly inadequate," said Ofgem chief executive, Alistair Buchanan.

"Suppliers need to manage customers’ direct debit payments much better, especially at a time when household budgets are under pressure. We are calling on suppliers to meet and beat our best practice and will take new licence powers to back this up if necessary."